C E C E N T E R T A I N M E N T , I N C .

2 0 0 5 Annual Report

WI T HOPENE ARS

To Our SHAREHOLDERS:

2 0 0 5 F I N A N C I A L R E S U L T S

Overcoming New Issues with Continued Strength.

2005 was a year of challenges for CEC Entertainment, Inc.

The economic environment was difficult, with higher gasoline

prices skewing the discretionary spending decisions of our

customers and hurricanes Katrina and Rita causing the loss of

over 700 store operating days in affected regions. As a result,

for the first time in a decade, there was a reduction in net

income from the previous year. In spite of these factors, we

remained financially solid and committed to our future with a

strong cash flow for executing our core growth strategies.

2 0 0 5 A C C O M P L I S H M E N T S

The Power to Stay Focused.

While presented with some unexpected obstacles, we were

able to maintain an unwavering commitment to our core

growth strategies. We invested $91 million into our concept —

impacting nearly 35% of our core stores with components

that have historically been proven to drive sales growth. A total

of 25 new restaurant-entertainment centers were opened, 2

stores were acquired from franchisees, and 137 more were re-

modeled or expanded, or had their games refreshed. We also

repurchased $117 million in outstanding shares, while

announcing a $400 million stock repurchase plan that was

approximately 15% complete at year end.

A P R O A C T I V E P L A N F O R T O D AY ,

T O M O R R O W , A N D B E Y O N D .

Chuck E. Cheese’s offers one of the most unique, popular, and

enduring family dining and entertainment experiences in the

marketplace. A playful and ever-youthful character, Chuck E.

Cheese has become a universally recognized icon of fun –

shown by independent research to be more popular among

kids ages 6 to 8 than Mickey Mouse®, Barbie®, Barney®,

Spiderman®, Ronald McDonald®, and scores of other top-

rated characters.

Our safe, wholesome environment has made us the unrivaled

Birthday Capital of the Universe®, with more than two million

parties hosted annually. And today, parents who were mem-

bers of our first generation of customers are now bringing

their kids to Chuck E. Cheese’s to create all-new memories.

Building on this strong foundation of success, we plan to

remain dedicated to advancing our core concept – winning the

increasing battle for disposable income and giving families

more reasons to visit.

Keeping the Fun Fresh In order to expand our leadership

role in the family entertainment segment, we anticipate a

development pace of 26-30 stores per year, with a goal of an

additional 80-90 new stores, including relocations, in the

next three years. We will also commit $38 million to remod-

els, store expansions, and game enhancements, targeting

approximately 140 stores by the end of 2006. Upon comple-

tion, each new and remodeled store will have a brighter, more

dynamic atmosphere and feature a wider variety of games for

different age groups, including simulators, games of skill, and

exclusive releases.

Striking Up the Brand Our standing television campaign

of 15-second commercials generates millions of favorable

brand impressions with kids across the United States. In an

effort to maximize this impact, 25% of our 2006 plan will now

feature 30-second commercials, shown to generate greater

child involvement in preliminary testing. In addition, the

increased length provides more time for brand interaction and

the explanation of promotions. The results of this change will

be carefully evaluated on an ongoing basis, giving us the flex-

ibility to integrate more 30-second commercials as needed.

Supported by the new longer television commercials, in con-

junction with free-standing inserts and www.chuckecheese.

com, the “Every Kid’s a Winner” promotion will be rolled

out nationally during the first quarter of 2006. By giving kids

a head start on all the excitement with an instant-win game

piece for the chance to win 5 to 20 free tokens, we expect this

compelling, kid-centered call-to-action to drive traffic and

increase sales.

Hitting a High Note with Value Focus groups have re-

vealed that coupons with affordable package deals and buy-get

offers for tokens help parents define the cost and give them

a sense of comfort in making the decision to visit Chuck E.

Cheese’s. This year parents can expect more value than ever,

as we increase our nationwide coupon frequency from 13 to

16 free-standing inserts featuring attractively priced package

deals and generous token offers. For kids, value is all about

the prizes, which is why we’ll be testing an improved display,

W E ’ V E B E E NLISTENING.CEC Entertainment, Inc. is a proven leader with a history of success built

on a fun-filled experience unlike any other. We take pride in knowing

we’re the best at what we do — and we’re passionate about making

things even better. That’s why we’ve been listening to everyone who’s

a part of the unique Chuck E. Cheese’s experience. Listening to kids,

parents, employees, and our own marketing experts. What we’ve heard

are powerful ideas — dynamic solutions that will be put into action for

2006 and beyond to grow our concept, provide an outstanding product,

drive sales, and increase long-term profitability.

Listening to Kids

OUR EARS ARE OPEN. OUR SENSES ARE SHARP.

OUR FOCUS IS ON SUCCESS.

R i c h a r d M . F r a n k

Chairman, Chief Executive Officer

M i c h a e l H . M a g u s i a k

President

upgraded prizes, and a wider assortment of ticket categories

to increase the variety and provide meaningful rewards.

Staying in Tune with Local Communities Beyond cel-

ebrating family fun, Chuck E. Cheese’s is also committed to

local families and communities through an ongoing support

of local schools. In 2006 we’ll help schools turn fun into

funds by increasing proceeds earned at “Cool for Your

School Fundraising Nights” from 10 percent to 15 percent.

While fostering goodwill by assisting parents and teachers

with fundraising efforts, these events also increase traffic

during traditionally slower parts of the week. We’ll also con-

tinue to reach out directly to kids by offering free tokens

for good grades. And, we’ll support their desire to learn by

continuing to underwrite quality Public Broadcasting System

programming like Clifford the Big Red Dog, Barney, Arthur,

Berenstain Bears, and Caillou.

Ensuring Every Guest Leaves Happy At every level,

Chuck E. Cheese’s leadership is focused on the ultimate

end-benefit of our product – the experience. Our people are

loyal, passionate, and committed to driving success through

customer satisfaction. Our 50+ district and regional manag-

ers have an average tenure of more than 15 years, and our

senior management team’s tenure of 19 years is among the

longest in the industry. Pretty amazing statistics, when one

considers that our company is only 27 years old. With this

wealth of experience, we will draw upon the exceptional tal-

ent of our people for the quality execution of every aspect of

our plans for 2006 and beyond.

I F Y O U L I S T E N C L O S E LY, Y O U C A N H E A R

T H E F U T U R E . . .

Our senses are honed. Our sights are set on evolving the

concept and furthering our core growth strategy. We’re com-

mitted to taking advantage of every opportunity to improve

our product, increase traffic, and drive long-term share-

holder value. The solution is loud and clear. Our guests and

employees all have a significant say in our future – and we’re

listening with open ears. Thank you for your continued support

and confidence.

Listening to EmployeesListening to Parents

2 0 0 5Form

1 0 - K

REVENUES

(In Millions)

2003 2004 2005

NET INCOME

(In Millions)

2003 2004 2005

CASH PROVIDED BY OPERATIONS (In Millions)

$165.8

$138.8

DILUTED EARNINGS PER SHARE

$1.66

$2.15$2.01

2003 2004 2005 2003 2004 2005

Financial HIGHLIGHTS

In 2005 CEC Entertainment, Inc. earned $73 million, experiencing its first net income decline in a decade. However, the com-pany remained financially strong and dedicated to its core growth strategies. During the year, 25 new restaurant-entertainment centers were opened, 2 stores were acquired from franchisees, and a total of 137 remodels, expansions, and game enhance-ments were completed. Additionally, $117 million in outstanding shares of common stock were repurchased. These actions represent management’s belief in the business and are reflective of a commitment to drive long-term shareholder value.

(Thousands, except per share and store data) 2005 2004 2003 O P E R A T I N G R E S U L T S

Revenues $ 726,163 $ 728,079 $ 654,598 Income before taxes 117,951 133,765 110,098 Net income 72,877 82,532 67,381

E A R N I N G S P E R S H A R E

Basic $ 2.08 $ 2.22 $ 1.70 Diluted 2.01 2.15 1.66

O T H E R I N F O R M A T I O N

Total assets $ 650,328 $ 612,017 $ 582,983 Long-term obligations (including current portion) 166,568 100,808 84,259 Shareholders’ equity 334,556 360,730 364,323

C H A N G E I N C O M PA R A B L E S TO R E S A L E S

Chuck E. Cheese’s -2.3% 2.0% -0.3%

N U M B E R O F R E S TAU R A N T S AT Y E A R E N D

Company operated 475 449 418 Franchise 44 46 48

Total 519 495 466

$654.6

$728.1 $726.2

$67.4

$82.5

$72.9$158.7

2 0 0 5Form

1 0 - K

The officers identified above are employed by CEC Entertainment, Inc. and its subsidiaries.

B O A R D O F D I R E C T O R S

R i c h a r d M . F r a n kR i c h a r d T . H u s t o nM i c h a e l H . M a g u s i a kL a r r y T . M c D o w e l l T i m T . M o r r i s

L o u i s P . N e e bC y n t h i a I . P h a r r L e eW a l t e r T y r e eR a y m o n d E . W o o l d r i d g e

C O R P O R A T E I N F O R M A T I O N

E x e c u t i v e O f f i c e s4441 West Airport FreewayP.O. Box 152077Irving, Texas 75015972/258-8507

A n n u a l S h a r e h o l d e r M e e t i n gMay 18, 20069:00 AMDallas / Fort Worth Airport Marriott South4151 Centreport DriveFort Worth, Texas

S to ck T r a n s f e r A g e n t a n d R e g i s t r a r

Mailing Address:Computershare LimitedP.O. Box 43023Providence, RI 02940

Overnight Address:Computershare Limited250 Royall St Canton, MA 02021

Shareholder Services:Telephone) 877/498-8865 Internet) www.equiserve.com

S t o c k L i s t i n gThe Company’s common stock is traded on the New York Stock Exchange under the symbol “CEC.”

I n d e p e n d e n t A u d i t o r sDeloitte & Touche, LLP2200 Ross AvenueSuite 1600Dallas, Texas 75201

1 0 - K A v a i l a b i l i t yThe Company will furnish any shareholder, without charge, a copy of the Company’s annual report filed with the Securities and Exchange commission on Form 10-K for the 2005 fiscal year (including the financial statements and schedules thereto) upon written request from the shareholder addressed to:

SecretaryCEC Entertainment, Inc.4441 West Airport FreewayP.O. Box 152077Irving, Texas 75015

C E O / C F O C e r t i f i c a t i o n sOn March 17, 2006, the Company submitted its annual Section 303A CEO Certification to the New York Stock Exchange. The Company also filed the CEO and CFO certifications required under Section 302 of the Sarbanes-Oxley Act of 2002 with the Securities and Exchange Commission as exhibits to its Annual Report on Form 10-K for the year ended January 1, 2006.

A n n u a l R e p o r t D e s i g nSquires & Company, Dallas

M a r s h a l l R . F i s c o , J r .Vice President Legal and Corporate Secretary

S t e v e n H a t t o nVice President Operations, Field Support

M i c h a e l H . J o h n s o nVice President Purchasing

M a r c T . K e r u mVice PresidentOperations, Southwest Region

J a m e s M a b r yVice President ControllerTreasurer

D o n L . M c K e c h n i eVice President Development, Construction

A h m e t O n e rVice President Management Information Systems

L o i s F . P e r r yVice President Advertising

O d o m S h e r m a n , J r .Vice President Taxes

J e f f S . S m i t hVice President Operations, Western Region

G a r y S p r i n gVice President Operations, Midwest Region

M a r k Wa l l a c eVice President Operations, Southern Region

A l i c e W i n t e r sAssistant Corporate Secretary

O F F I C E R S

R i c h a r d M . F r a n kChairman of the Board/ Chief Executive Officer

M i c h a e l H . M a g u s i a kPresident

J o h n R . C a r d i n a l eExecutive Vice President Development and Purchasing

G e n e C r a m mExecutive Vice President Games, Entertainment, Franchise and Concept Evolution

M a r k A . F l o r e sExecutive Vice President Operations

R i c h a r d T . H u s t o nExecutive Vice President Marketing

C h r i s t o p h e r D . M o r r i sExecutive Vice President Chief Financial Officer

T h o m a s W . O l i v e rExecutive Vice President General Counsel

R a n d y F o r s y t h eSenior Vice President Operations, Northern Region

C a t h e r i n e R . O l i v i e r iSenior Vice President Human Resources,Risk Management, Benefits

S a n d r a J . B r o w nVice President Payroll, Accounts Payable and Inventory

K e n n y L . B u l l o c kVice President Real Estate

J o e E l l i o t tVice President Research And Development